The beleagured Haldia Petrochemical Ltd (HPL) has got a breather with the Centre waiving the duty imposed on imports of naphtha, HPL's feedstock. Prices of this item have risen by 39 per cent since July 2010 and HPL's losses at Rs.240 crore in the first quarter is close to the entire loss of 2010-11.
The notification issued in this regard by the Union Finance Ministry said that the import duty on naphtha used by HPL for the manufacture of polymers was being reduced to nil from 5 per cent now.
This would translate to a major benefit in a full year for HPL which had entered a loss-making spree since the levying of this duty in 2008-09. This had led to an elimination of the duty-differential between naphtha and polymer completely and had impacted HPL's financial position given the fact that it meets 75 per cent of its requirement through imports. A number of representations made for relief in this respect even at the level of the former Chief Minister had gone unheeded until now. The new dispensation at the state government as well as at Haldia Petrochemical seems to have changed the Centre's view of things.
Sources said that in most countries where naphtha cracker produces polymers, a duty-differential in favour of polymers is in existence.However, for HPL to return to black it also needs relief on the MS oil front whereby the state government, HPL's other main promoter, had in 2006 issued a notification classifying it as an oil company, after it started manufacturing MS oil as petrol substitute. HPL loses nearly Rs.1 crore daily on this account. Losses have now mounted to nearly Rs.1,000 crore.
In 2010-11, its losses were Rs.276 crore with a debt-servicing of Rs.700 crore on a sales turnover of Rs.7,800 crore. The current year is proving to be a challenge, since the polymer market is sluggish.
